A common notion about credit cards is that they are bad and you should not use them. I personally know a few people who do not use credit cards and either use cash or their debit card to pay for any purchases. I think this is great if you are not disciplined but it is also a hindrance to benefiting from what credit cards have to offer.
Truth be said, credit cards are really not for everyone. Why is that so? If you are irresponsible and do not know how to use credit wisely then they are really not for you. They offer the chance for you to borrow money but at the same time gets you deeper into a financial mess as they normally carry high interest rates at about 11- 25% at a minimum.
Credit cards are really not evil as you may think they are. They are actually great if you know what you are doing with it and know how to use it the right way. A very basic rule, if you borrow money towards your card, pay it in full every month so as to not carry balances and pay the high interest rate.
Let’s think of a couple of scenarios here. Imagine you are at a coach store and you see a bag on sale for $150. Your adrenaline now rushes and you are now impulse buying. A month later your credit card is due for payment and you only pay the minimum amount of $25. A carry over balance of $125 plus the interest rate at 25% equivalent to $31.25. So instead of saving money, you are now giving the bank $31.25 for that month that you borrowed money I supposed to using that money for let’s just say filling up your gas tank.
Now imagine carrying over a couple of thousand dollars of balance each month say $3000 of credit card debt at 25% would equate to $750 dollars that you are giving away to the bank. What a waste, I could have gone on vacation with that amount of money!
So, a few pointers to beat the bank and win the credit card game.
1. Pay your bills on time and in full each month
2. Sign up for a cash reward credit card that would give you points towards your purchase. Normally this credit cards have also introductory bonuses on the average of $200 just for signing up. This is a great way to get cash back from purchases you are already planning to do.
- A bit of a caution here, credit cards that offer points have higher interest rates than other credit cards so if you sign up for one, make sure you pay your balances in full.
3. Pay your phone bills, insurance, groceries and gas using your credit card to maximize points and earn those cash back.
4. Did you know that you can negotiate your credit card rates by calling your bank? If you are a good customer and pay on time, odds are the bank can lower down your credit card rates.
5. Discipline yourself to only buy what you need and don’t be too materialistic, trust me, you are not going to need new jeans or new pair of shoes every month.
Bottom line, credit cards are great. They offer a lot of benefits including loaning money to you for free every month if you pay on time. Just use them when you absolutely need them. Discipline is the key, you are an adult now so be responsible and manage your credit the right way.
I hope I have offered some great insights. If you have any stories to tell about your credit card experience and benefits, drop me a message.